British Rail plunges 164m pounds into the red: Preparation for privatisation causing problems, union leader says

BRITISH RAIL plunged deeply into the red during its last financial year because of falling passenger numbers and massive borrowings, losing pounds 139m more than in 1991-92.

With the privatisation process due to start in April 1994, the figures are unlikely to impress the potential private operators the Government hopes to attract to some services by next autumn.

Yesterday, Sir Bob Reid, the British Rail chairman, announced a loss of pounds 163.9m for 1992-93. For the year 1991-92, BR lost pounds 144.7m, but a change in accountancy policy, involving writing off assets over 30 years instead of one, to bring BR into line with other companies, meant that this figure was revised to pounds 24.6m.

BR has become a heavily indebted railway. Only three years ago, its long- term borrowings were just pounds 170m, but last year they reached pounds 1,825m, a tenfold increase in just two years.

BR used to be able to fund much of its investment from revenue, but falling income and the high level of spending on preparing for the Channel tunnel has made this impossible. Interest payments last year were pounds 144m, double the previous year.

Underlying the loss was a 2 per cent fall in passengers and a 4 per cent fall in freight and parcels, caused by the recession. The recession has led to a shift in passengers from first to second class, also hitting revenue.

Although InterCity, BR's flagship which receives no subsidy, made an operating profit of pounds 65.1m, this is a drop of pounds 25m from last year if the same accountancy practice is be used. Sir Bob warned that BR faced an investment crisis. Although investment last year was high, at nearly pounds 1bn on the existing railway, this year tight government restrictions mean it would fall to pounds 616m, well below the pounds 850m Sir Bob says is necessary.

Sir Bob said: 'The success of privatisation will depend as much on investment as on restructuring.' On 1 April, BR will be split into 65 companies and units, losing control of the track which will go to Railtrack, and the rolling stock which will go to three leasing companies.

Jimmy Knapp, the leader of RMT, the rail union, said: 'The message of this report is that the preparation for privatisation is already causing massive problems.'

The Government is to reduce the money available for BR to run subsidised services by pounds 300m this year, compared with 1992-93. BR will save pounds 120m from having made 8,000 staff redundant last year - and a further pounds 96m in redundancy costs, as a one- off - but John Welsby, BR's chief executive, was unable to explain where the rest of the savings would be made.

BR has cut very few services during the recession and the Government would find it politically impossible to close lines or raise fares sharply in the run-up to privatisation.

BR sources say the Government will have to rescue BR to save privatisation from disaster. The privatisation process has officially cost pounds 10m, thought to be a gross underestimate, and is taking up 25 per cent of managers' time. Costs are mounting as a result of reorganising BR and creating up to 14,000 contracts between the various units and companies.

----------------------------------------------------------------- BR FACT FILE ----------------------------------------------------------------- BR carried an average of 2.1 million passengers every weekday on 14,000 trains. No passenger was killed in a train crash in 1992-93, the first time this has happened since 1989-90. Pounds 1,154m was received in grant, or over pounds 3m per day, to run subsidised services. BR carried 122.4 million tons of freight, compared with 135.8 million in the previous year. BR now employs 122,780 people, compared with 129,990 in 1991-92. Turnover was pounds 3,116m, compared with pounds 3,151m in 1991-92. -----------------------------------------------------------------

Start your day with The Independent, sign up for daily news emails
Barn owls are among species that could be affected
charity appeal
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricketEoin Morgan reportedly to take over ODI captaincy as ECB finally wield the axe
Life and Style
food + drink
Arts and Entertainment
a clockwork orange, stanley kubrick
Have you tried new the Independent Digital Edition apps?
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Finance Director

£65000 - £80000 per annum: Recruitment Genius: Finance Director required to jo...

Recruitment Genius: Medico-Legal Assistant

£15000 - £25000 per annum: Recruitment Genius: This is a unique opportunity fo...

Ashdown Group: (PHP / Python) - Global Media firm

£50000 per annum + 26 days holiday,pension: Ashdown Group: A highly successful...

The Jenrick Group: Quality Inspector

£27000 per annum + pension + holidays: The Jenrick Group: A Quality Technician...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas